Empirical Economics

, Volume 56, Issue 1, pp 301–323 | Cite as

The cyclical behavior of R&D investment during the Great Recession

  • Zeynep KabukcuogluEmail author


This paper investigates the cyclicality of research and development (R&D) activities during the Great Recession period by incorporating the role of credit constraints, using the Great Recession period as a natural case study. Recession period is a good setting in which to identify cyclicality and eliminate endogeneity issues that have been discussed in the literature. Using firm-level data on non-federally funded, high-technology firms in the USA, this paper shows that firms without bond ratings had more procyclical R&D investments than those firms with bond ratings. I also test whether capital or inventory investments of firms that also do R&D are procyclical. I find that firms without bond ratings adjust their inventories more rapidly compared to capital and R&D investments, when they are hit by a bad shock.


Business cycles R&D Investment-liquidity sensitivity Great Recession 



I am grateful for helpful comments from Daniele Coen-Pirani, Marla Ripoll, Frederik-Paul Schlingemann, Sewon Hur, James Cassing, Kristle Romero-Cortés and seminar participants in the University of Pittsburgh. I also would like to thank the editor, Bertrand Candelon, and the anonymous reviewer for their constructive remarks on this version.


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Authors and Affiliations

  1. 1.Department of Economics, Villanova School of BusinessVillanova UniversityVillanovaUSA

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